Confidence interval estimation tasks and the economics of overconfidence

David Cesarini; Örjan Sandewall; Magnus Johannesson

doi:10.1016/j.jebo.2004.10.010

Confidence interval estimation tasks and the economics of overconfidence

David Cesarini, Örjan Sandewall, Magnus Johannesson

Research output: Contribution to journal › Article › peer-review

Abstract

We investigate the robustness of results from confidence interval estimation tasks with respect to a number of manipulations: frequency assessments, peer frequency assessments, iteration, and monetary incentives. Our results suggest that a large share of the overconfidence in interval estimation tasks is an artifact of the response format. Using frequencies and monetary incentives reduces the measured overconfidence in the confidence interval method by about 65 percent. The results are consistent with the notion that subjects have a deep aversion to setting broad confidence intervals, a reluctance that we attribute to a socially rational trade-off between informativeness and accuracy.

Original language	English (US)
Pages (from-to)	453-470
Number of pages	18
Journal	Journal of Economic Behavior and Organization
Volume	61
Issue number	3
DOIs	https://doi.org/10.1016/j.jebo.2004.10.010
State	Published - Nov 2006

Keywords

Experiments
Monetary incentives
Overconfidence
Uncertainty

ASJC Scopus subject areas

Economics and Econometrics
Organizational Behavior and Human Resource Management

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10.1016/j.jebo.2004.10.010

Cite this

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title = "Confidence interval estimation tasks and the economics of overconfidence",

abstract = "We investigate the robustness of results from confidence interval estimation tasks with respect to a number of manipulations: frequency assessments, peer frequency assessments, iteration, and monetary incentives. Our results suggest that a large share of the overconfidence in interval estimation tasks is an artifact of the response format. Using frequencies and monetary incentives reduces the measured overconfidence in the confidence interval method by about 65 percent. The results are consistent with the notion that subjects have a deep aversion to setting broad confidence intervals, a reluctance that we attribute to a socially rational trade-off between informativeness and accuracy.",

keywords = "Experiments, Monetary incentives, Overconfidence, Uncertainty",

author = "David Cesarini and {\"O}rjan Sandewall and Magnus Johannesson",

note = "Funding Information: The authors thank J. Edward Russo for generously taking the time to engage in a helpful e-mail exchange. This paper has also benefited from discussions with Christopher Brooke, Cesar Calvo, Erika F{\"a}rnstrand, Drebbe Junior, Esra Karakaya, Bj{\"o}rn Wallace and, in particular, Tino Sanandaji. Financial support from the Jan Wallander and Tom Hedelius Foundation is gratefully acknowledged. ",

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AU - Cesarini, David

AU - Sandewall, Örjan

AU - Johannesson, Magnus

N1 - Funding Information: The authors thank J. Edward Russo for generously taking the time to engage in a helpful e-mail exchange. This paper has also benefited from discussions with Christopher Brooke, Cesar Calvo, Erika Färnstrand, Drebbe Junior, Esra Karakaya, Björn Wallace and, in particular, Tino Sanandaji. Financial support from the Jan Wallander and Tom Hedelius Foundation is gratefully acknowledged.

PY - 2006/11

Y1 - 2006/11

N2 - We investigate the robustness of results from confidence interval estimation tasks with respect to a number of manipulations: frequency assessments, peer frequency assessments, iteration, and monetary incentives. Our results suggest that a large share of the overconfidence in interval estimation tasks is an artifact of the response format. Using frequencies and monetary incentives reduces the measured overconfidence in the confidence interval method by about 65 percent. The results are consistent with the notion that subjects have a deep aversion to setting broad confidence intervals, a reluctance that we attribute to a socially rational trade-off between informativeness and accuracy.

AB - We investigate the robustness of results from confidence interval estimation tasks with respect to a number of manipulations: frequency assessments, peer frequency assessments, iteration, and monetary incentives. Our results suggest that a large share of the overconfidence in interval estimation tasks is an artifact of the response format. Using frequencies and monetary incentives reduces the measured overconfidence in the confidence interval method by about 65 percent. The results are consistent with the notion that subjects have a deep aversion to setting broad confidence intervals, a reluctance that we attribute to a socially rational trade-off between informativeness and accuracy.

KW - Experiments

KW - Monetary incentives

KW - Overconfidence

KW - Uncertainty

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JO - Journal of Economic Behavior and Organization

JF - Journal of Economic Behavior and Organization

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ER -

Confidence interval estimation tasks and the economics of overconfidence

Abstract

Keywords

ASJC Scopus subject areas

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